Definitions

A

absolute discharge
The final step in bankruptcy proceedings, an absolute discharge is the release of the bankrupt from the legal obligation to pay back what is owed—with some exceptions—as of the date of the filing of the bankruptcy.
affidavit
A written statement of facts confirmed in front of an official such as a Notary Public or Commissioner of Oaths.
arm’s length
Describes dealings between two parties who are free and independent of each other and who do not share a special relationship such as being related or where one party as control over the other.
assets
What a person owns that can be sold or used to pay a debt.
assignment in bankruptcy
When a debtor voluntarily assigns all of his or her property to a trustee in bankruptcy so it can be sold or used to pay a debt.
automatic discharge
The final step in bankruptcy proceedings, a discharge is the release of the bankrupt from the legal obligation to pay back what is owed—with some exceptions—as of the date of the filing of the bankruptcy. When an automatic discharge occurs, the bankrupt doesn’t have to go to court for the proceedings to be finalized. This can happen only if the following conditions are met:
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B

bankrupt
The legal status of a person who is unable to pay his or her debt (that is, is insolvent) and has declared bankruptcy. The status remains until there has been a discharge from bankruptcy.
bankruptcy
A legal process governed by the Bankruptcy and Insolvency Act for a person who can no longer pay back debt. The person who owes the debt assigns all assets —with some exceptions —to a trustee in bankruptcy who sells it or uses it to help pay the debt to the creditors.
Bankruptcy and Insolvency Act (BIA)
The law that regulates bankruptcy and insolvency in Canada.
bankruptcy order
A formal Court document that forces a person to assign all assets—with some exceptions—to a trustee in bankruptcy who sells it or uses it to pay the creditors.

C

Certificate of Full Performance of Proposal
When an insolvent person (debtor) meets the obligations outlined in the proposal, a Certificate of Full Performance of Proposal is issued by the trustee. Once the Certificate has been issued, the debtor is released from the debt included in the proposal.
claim
A statement by a creditor that he or she is owed money by a person. (See Proof of Claim.)
Companies’ Creditors Arrangement Act (CCAA)
Federal law allowing insolvent corporations that owe their creditors in excess of $5 million to restructure their business and financial affairs.
conditional discharge
The final step in bankruptcy proceedings, a discharge is the release of the bankrupt from the legal obligation to pay back what is owed—with some exceptions—as of the date of the filing of the bankruptcy. A conditional discharge occurs when the Court imposes certain conditions that must be met before a person’s discharge becomes absolute. For example, the Court may require the debtor to pay an amount to the trustee in bankruptcy for distribution to creditors.
Consolidation Order
In Alberta, Saskatchewan or Nova Scotia, a debtor can voluntarily seek out a legal proceeding (also known as an orderly payment of debt program) to help make their payments. The order will consolidate all debts and determine an amount that the debtor must pay to the Court on a periodic basis. Upon receipt of the payments, the Court will make payments to the creditors on behalf of the debtor. In most cases, the period of time of the program set by the court is three years.
consumer proposal
A formal offer by a debtor to creditors. This may include an offer to pay a percentage of the debt, pay back the debt over a longer period of time, or both.
This option is available to individuals whose total debt does not exceed $250 000, not including debts secured by their principal residence.
corporation
A legal entity (usually a business), distinct from its shareholders, that under law, can act as a natural person.
counselling
Counselling is designed to help debtors figure out why they got into financial trouble and teach them to better manage their financial affairs in the future.
Counselling must be given by a counsellor registered with the Office of the Superintendent of Bankruptcy.
creditor
A creditor is a person who is owed money, goods or services.
preferred creditor
A preferred creditor has a first claim to any funds that are available.
secured creditor
A secured creditor is one who takes collateral for the extension of credit, such as when a car or house is purchased.
unsecured creditor
An unsecured creditor is one who gives credit but who does not have any security for the debt owed them.
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D

debt
A specific amount (usually money) that is owed by one person (a debtor) to another (a creditor). A debt is payable in money, in goods or in services.
debtor
A debtor is a person who owes a specific debt (usually money) to another person. In the context of the Bankruptcy and Insolvency Act, a debtor is a person who is insolvent, that is, he of she cannot pay off debt as it becomes due.
default
Failure to honour a contract or agreement (usually to pay a debt).
discharge from bankruptcy
The final step in bankruptcy proceedings, a discharge is the release of the bankrupt from the legal obligation to pay back what is owed—with some exceptions—as of the date of the filing of the bankruptcy.
absolute discharge
When an absolute discharge occurs, the bankrupt is released from his or her legal obligation to pay back the debt—with some exceptions—as of the date of the filing of the bankruptcy.
automatic discharge
When an automatic discharge occurs, the bankrupt doesn’t have to go to court for the proceedings to be finalized. This can happen only if the following conditions are met:
conditional discharge
The Court may impose certain conditions that must be met before a person’s discharge becomes absolute. For example, the Court may require the bankrupt to pay an amount to the trustee in bankruptcy for distribution to creditors.
suspended discharge
The Court orders a delay that results in the discharge not being in effect until a later date.
dividend
A proportional share of a bankrupt’s estate paid out by the trustee in bankruptcy to creditors who have proven claims against that estate.
Division I (commercial) proposal
A formal offer by a debtor to creditors. This may include an offer to pay a percentage of the debt, pay back the debt over a longer period of time, or both.
Unlike a consumer proposal, there is no limit with respect to how much money is owed.
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E

estate
All the possessions of a person.
examination
Formal questioning of the debtor under oath. The examination may be done by a representative of the Office of the Superintendent of Bankruptcy (an official receiver), a trustee in bankruptcy, a creditor or another interested person as outlined in the Bankruptcy and Insolvency Act.

G

garnishment
A legal process where a creditor gets a third party (often an employer) to turn over a debtor’s property, such as wages or bank accounts.

I

inspector
A person appointed by creditors to represent them before the trustee in bankruptcy during the administration of a bankruptcy or proposal. An inspector assists the trustee and is required to supervise certain aspects of the trustee‘s work.
insolvency
The inability of a debtor to pay off debt as it becomes due.
interim receiver
An interim receiver is a trustee in bankruptcy appointed by the court to safeguard the estate’s assets and perform other functions as the Court may order.

L

liabilities
An amount owing by one person (a debtor) to another (a creditor), payable in money, goods or services.
lien
A legal right or interest that a creditor has in a debtor‘s property, lasting usually until the debt that it secures is paid.
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M

mediation
A way of resolving conflict between two or more people. The parties involved in the disagreement agree to work with an unbiased person (a mediator) who helps them settle their dispute.

N

Notice of Intention to File a Proposal
A legal document stating that the debtor intends to file a Division 1 (commercial) proposal to creditors. Once filed, actions against the debtor by unsecured creditors are stopped.

O

official receiver
A federal government employee in the Office of the Superintendent of Bankruptcy who is appointed by the Governor in Council. Among other things, the official receiver accepts the documents that are filed in proposals and bankruptcies, examines bankrupts under oath and chairs meetings of creditors.
Office of the Superintendent of Bankruptcy
The Office of the Superintendent of Bankruptcy ensures a fair and efficient marketplace by protecting the integrity of the bankruptcy and insolvency system for the benefit of investors, lenders, consumers and the public. This is done through the supervision of the administration of all estates and matters under the Bankruptcy and Insolvency Act.
orderly payment of debt program
In Alberta, Saskatchewan or Nova Scotia, a debtor can voluntarily seek out a legal proceeding (also known as an Consolidation Order) to help make their payments.
The program will consolidate all debts and determine an amount that the debtor must pay to the Court on a periodic basis. Upon receipt of the payments, the Court will make payments to the creditors on behalf of the debtor. In most cases, the period of time of the program set by the court is three years.
ordinary resolution
A resolution carried by the majority of votes (one vote for each dollar of debt) of creditors.

P

person
Includes a human being (natural person), a partnership or a corporation that is recognized by law as having rights and duties.
Power of Attorney
A legal document that sets out an individual’s authority to act on behalf of the person giving the Power of Attorney.
preferred creditor
A creditor is a person, institution or business who is owed money, goods or services. A preferred creditor has a first claim to any funds that are available.
preferential treatment
The payment of money or the granting of security by a debtor that benefits one or more creditors over others.
priority
The order in which creditors are ranked for payment of claims provable under the Bankruptcy and Insolvency Act.
proof of claim
A written statement that, along with documents that verify it, proves a claim by a creditor. If accepted by the trustee in bankruptcy, the proof of claim is used to determine how much is paid to the creditor.
property
Assets including money, land, movable and immovable property, and personal and real property, situated in Canada or elsewhere.
proposal
A formal offer by a debtor under the Bankruptcy and Insolvency Act to creditors to settle debts under conditions other than the original terms.
proxy
A document signed by a creditor granting another person the authority to either
  • represent or vote in their place at creditors’ meetings; or
  • submit a claim for unclaimed dividends on behalf of the person
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Q

quorum
The minimum number of creditors who must be present in person or by proxy to conduct business or take a vote at a creditors’ meeting.

R

receiver
A person appointed by, or on behalf of, a creditor to take control of the assets of a debtor.
related persons
Persons who are connected by a blood relationship, marriage, adoption or common law partnership. The Bankruptcy and Insolvency Act states that the definition of “related persons” extends to corporations, shareholders and directors in certain situations.
resolution
A formal expression of intent made by creditors.
ordinary resolution
A resolution carried by the majority of votes (one vote for each dollar of debt) of creditors.
special resolution
A resolution decided by a majority in number and three-fourths in value of the creditors with proven claims present, personally or by proxy, at a meeting of creditors and voting on the resolution.

S

secured creditor
A creditor is a person who is owed money, goods or services. A secured creditor is one who takes collateral for the extension of credit such as when a car or house is purchased.
security
Property or assets given or pledged to guarantee the payment of a loan.
seizure
The act of taking possession of property by legal right or process.
special resolution
A resolution decided by a majority in number and three-fourths in value of the creditors with proven claims present, personally or by proxy, at a meeting of creditors and voting on the resolution.
Statement of Affairs
The debtor‘s financial statement that contains a list of assets and liabilities, the estimated value of assets, the names and addresses of creditors, and the amounts owed to those creditors. This is usually presented at the beginning of the process.
Statement of Receipts and Disbursements
A statement from the trustee in bankruptcy that lays out the list of funds that have been received (including interest), the fees charged by the trustee, all the dividends distributed to the creditors and particulars of property that is not sold. This is usually presented at the end of the process.
stay of proceedings
Once a person files for bankruptcy or files a proposal, a “stay of proceedings” immediately prevents creditors from either starting or continuing a legal action against the debtor.
surplus income
Amount of a debtor’s total income that exceeds what is necessary to maintain a reasonable standard of living according to the standards set by the Office of the Superintendent of Bankruptcy. The bankrupt must make payments out of this surplus income to the bankruptcy estate for distribution among the creditors.
suspended discharge
The final step in bankruptcy proceedings, a discharge is the release of the bankrupt from the legal obligation to pay back what is owed—with some exceptions—as of the date of the filing of the bankruptcy.
A suspended discharge occurs when the Court orders a delay so the bankrupt’s discharge will not be effective until a later date.

T

taxation of accounts
An application for Court approval of the fees and disbursements of the trustee in bankruptcy, interim receiver or legal counsel.
trust
Assets held by one person at the request of a second person for the benefit of a third person.
trustee in bankruptcy
A person licensed by the Office of the Superintendent of Bankruptcy to administer bankruptcies and proposals.

U

unsecured creditor
A creditor is a person who is owed money, goods or services. An unsecured creditor is one who gives credit but who does not have any security for the debt owed them.
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V

voting letter
A document in which a creditor with a provable claim registers his or her vote for or against a proposal.
Voluntary Deposit Service
For the residents of Quebec, a proceeding where the debtor makes a monthly payment based on his or her income and number of dependents to the Court who will, in turn, distribute theses payments to the creditors until the debt is paid.